A decade of flip-flops on farmers’ issues despite full-majority government

Despite no quick fixes for the challenges faced by farmers, their ongoing demonstrations are particularly troubling for the government with national elections on the horizon. Although a previous round of protests in 2020–2021 did not hurt the Bharatiya Janata Party's (BJP) performance in crucial state elections, it led to the withdrawal of three controversial agricultural laws. This rare retreat indicates that, despite broad support, the government cannot afford to overlook the concerns of farmers, now any more than it could then.

Many experts have argued that the scrapped laws were essential reforms aimed at cutting out middlemen, but farmers feared they signalled the corporatization of Indian agriculture. The revival of protests underscores unmet promises, with farmers now demanding a legal guarantee for minimum support prices (MSPs) for crops. (A legal mandate would ensure that the government-set MSP becomes a floor price even if farmers sell their produce to non-state buyers.) Some warn it will drain the government’s coffers, while others propose less burdensome ways to address farmers’ issues.

(In response to the protests, the Centre floated a proposal to buy at least five crops over the next five years at minimum support price, or MSP, but the farmers rejected this on Monday.)

Dream vs reality

Even though the MSP mechanism has been in place for decades, it has done little to address the plight of the farmers, with incomes remaining very low. The average annual income of farmers (from both farm and non-farm sources) was estimated at just ₹96,703 in 2015-16, which the committee formed in 2016 proposed to raise to ₹2.71 lakh by 2022-23—implying a compound annual growth rate of 14.1%. However, a National Sample Survey report for 2018-19 showed farmer incomes averaging only ₹1.23 lakh, far from the target.

Slow growth in the early years of the timeframe meant that the required run rate for the remaining period had inched up to 18.6% per year by then, Mint calculations show. This would have needed an ambitious push for reforms and policies.

In February 2019, despite the interim nature of the pre-election Budget, the government found a way to introduce the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), which guaranteed income support of ₹6,000 per year for all land-holding farmer families. The scheme has helped, but its allocation has not seen any increase over the years despite high inflation eating into purchasing power, especially in rural areas.

The Centre also tried to help farmers by sharply raising the MSP for key crops in 2018-19, but the hikes have been low since then. Worse, less than half of the farmers are aware of the MSP promise and even fewer sell their produce to the procurement agencies that buy at MSP.

Besides, the demand for a legal mandate for MSPs, or even the opposition to the farm laws, which had promised a free-market-like mechanism, may have emerged from distrust in the government due to its “ad hoc" responses to instances of price rise, when farmers could potentially make profits.

“The issue is, the government, even when the (farm laws) ordinance was in effect, imposed export ban on onions and a couple of other commodities, just because there was an expectation that prices would rise," said Avinash Kishore, senior research fellow at the International Food Policy Research Institute. “Farmers know from experience that the government would not hold on to its promises, even if it is written into the law. One of the things that the government can do is make market policy and trade policy more predictable."

Kishore said the legal mandate for MSPs for all crops would put a lot of fiscal pressure and would be difficult to implement.

Meeting in the middle

On top of the structural woes, India’s farmers are not immune to new challenges being felt across the world, including the effects of climate change and the rising food prices. Low production takes prices upwards, but when the government steps in, it puts consumers’ interest over farmers’. When abundant supply leads to price crashes, farmers end up dumping crops. The farmers want protection from such price crashes.

Some experts argue against forcing private players to buy the produce at government-set rates. Rather, the government could intervene only when market prices slip below MSP, just the way it does during price spikes. If the government procured only the crops trading below MSP, it would amount to cash support during such times, and also give farmers the freedom to sow crops of their choice based on local conditions, a report by CRISIL Market Intelligence & Analytics said.

While this would require massive working capital, the real cost to the government would be less—the difference between the mandi prices and the MSP works out to be about ₹21,000 crore in the marketing year 2023, the report added.

As the Modi government navigates the path forward, it faces a choice: continue to sideline farmers' demands or engage in meaningful negotiations to find practical solutions before the upcoming elections. But the track record shows that progress on addressing farmers’ issues so far remains sketchy.

This is the third part of an ongoing Plain Facts series covering the top election issues as well as the current government’s report card after nearly 10 years in power.

Part 1: In charts: Story of polls, freebies and politics

Part 2: Why low unemployment rate hides the full picture